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(WASHINGTON) — A group of Senate Democrats are demanding more information about Secretary of Defense Pete Hegseth’s finances and investments following a report — which the Pentagon demanded be retracted — that he may have tried to invest in defense stocks before the war in Iran began roughly five weeks ago.

“If this report is accurate, it would appear to represent an appalling effort to profit off of your knowledge of the President’s plans for war,” Democratic Sens. Elizabeth Warren, Richard Blumenthal, Tammy Duckworth, Jeff Merkley and Gary Peters wrote in a letter to Hegseth — and provided exclusively to ABC News — on Wednesday night. “This would be a profound conflict of interest and a potential violation of your federal ethics agreement — and betrayal of the nation paying the price for this war and the troops you are sending into harm’s way.”

The Financial Times reported earlier this week that a broker for Hegseth at Morgan Stanley contacted BlackRock — an equity fund — and tried to make a multimillion-dollar investment into a fund with defense stocks weeks before the Iran war.

The investment did not go ahead because it was not yet available for Morgan Stanley clients, the Financial Times reported — adding that it’s not clear whether Hegseth’s broker found another defense fund to invest in.

ABC News has not independently confirmed the Financial Times’ report.

When reached by ABC News, Morgan Stanley and BlackRock declined to comment on the Financial Times report

In a post on X on Monday, Pentagon chief spokesman Sean Parnell dismissed the report calling it “entirely false and fabricated” and demanded a retraction from the Financial Times.

Still, the Democratic senators, led by Armed Services Committee member Warren, said in their letter that if the report turns out to be accurate, it would be a “serious breach of the public’s trust” and in violation of the ethics agreement he signed ahead of his confirmation as secretary of defense.

“The American people deserve leaders they can trust to put national security ahead of their own financial self-interest,” the senators wrote to Hegseth.

Hegseth is prohibited, under the Department of Defense’s standards of conduct, from owning stock in 10 major industry-specific corporations including Lockheed Martin, Northrop Grumman, General Dynamics, Huntington Ingalls Industries, Boeing, RTX Corporation and L3Harris, which are part of the fund that the Financial Times article claims Hegseth’s broker attempted to purchase.

Hegseth does not have any major holdings in defense companies, according to his most recent financial disclosure reviewed by ABC News.

“Since this was a multi-million dollar investment in a sector-specific fund, your agreement appears to indicate that your broker would have needed your approval or that you did not intend to meet the commitments you made in your ethics agreement,” the senators wrote. 

The senators have asked Hegseth to respond to a number of questions about the Financial Times report.

They ask Hegseth to say whether he shared any information with his broker about pending military action or whether he directed his broker to invest in any defense related funds, including BlackRock as the Financial Times report suggests, ahead of the Iran war. They also ask what instructions Hegseth has given his broker to try to avoid conflict of interests and they ask for an accounting of defense stocks owned and sold by Hegseth and his wife.

In his statement, Parnell said that Hegseth and the Department of Defense “remain unwavering in their commitment to the highest standards of ethics and strict adherence to all applicable laws and regulations.”

The senators say that getting answers to their questions will help them to “understand where there may be gaps in current department practices and policies to prevent conflicts of interest.”

House Democrats are also looking into the allegations made about Hegseth in the Financial Times report. 

Rep. Robert Garcia, the top Democrat on the House Oversight Committee, announced Tuesday that he’d launch an investigation into the matter.

Republicans have not been publicly commenting on Financial Times report. ABC News has reached out to Senate Armed Services Committee Chairman Roger Wicker for comment about Democrats’ calls for an investigation, but did not receive a response.

ABC News’ Elizabeth Schulze and Lauren Peller contributed to this report.

Editor’s note: This story has been updated to reflect Sen. Jeff Merkley is one of the co-signers of the letter.

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(WASHINGTON) — Top Trump administration officials have touted diplomatic efforts to end the war in Iran as the president signals it could end without pursuing the challenging military operation of opening the Strait of Hormuz with naval escorts.

In an interview with “Good Morning America” host George Stephanopoulos on Monday, Secretary of State Marco Rubio did not cite the reopening of the strait, the vital chokepoint of which 20% of the world’s oil flows through, which has been largely closed to shipping traffic, as a U.S. objective. President Donald Trump in the early days of the war said the U.S. Navy would take measures to ensure ships could sail there.

Rubio listed the “destruction” of Iran’s air force, navy, missile-launch capacity and military industry as the four objectives of what he termed a U.S. “operation.”

“All of this so that they can never hide behind it to acquire a nuclear weapon,” Rubio said. “That was our objective from the beginning; that remains our objective now.”

Secretary of Defense Pete Hegseth on Tuesday also omitted freedom of movement in the Strait of Hormuz as one of the Pentagon’s priorities, instead calling on other nations with energy interests there to be involved in reopening it.

The president shifted responsibility over the strait — whose access has been largely blocked by Iran as a response to the U.S. and Israel attacks on the country — to those allies and partners.

“They can police it themselves,” Trump told ABC’s Jonathan Karl on Tuesday. “Why should I do it for them?”

The apparent recalibration — just days after Trump threatened intensified military action if Iran did not move to open the strait — signals the US could be plotting an exit in which it declares it’s accomplished the outlined military objectives without seeking to repair the war’s most devastating economic consequence, a former senior U.S. diplomat said.

“I think Rubio may have signaled one option the president has,” said the former diplomat who engaged in negotiations with Iran. “It’s not a very good one, but … of the bad and worse options, it’s probably the better bad option.”

The former U.S. official said a hasty exit from the conflict without addressing two of its thorniest issues — the Strait of Hormuz and Iran’s nuclear stockpile — suggests there is a diplomatic deal to be achieved that would end the fighting.

“I think Rubio, at least, sounds like he just wants to bring this [conflict] to closure along the parameters that he outlined, and then hope that world pressure opens the Strait of Hormuz,” the former official said.

Objectives articulated by the administration earlier in the conflict — like regime change and denuclearization — would remain unmet by such a deal, the former diplomat said.

Tehran’s diplomatic view
Whether or not the U.S. is pursuing a diplomatic exit, it will be complicated for a battered Iran to deal with a country that initiated a war with it a month ago, analysts of Tehran’s government told ABC News.

Iran may be open to diplomacy, the analysts said, but it would seek durable assurances that it will not be attacked by the U.S. — or Israel — in the future.

Iranian Foreign Minister Abbas Araghchi said Tuesday that his country was not negotiating with the U.S. but that messages were being passed.

Pakistan, who along with Turkey and Egypt has positioned itself as an intermediary between the U.S. and Iran, have been delivering those messages between the warring nations, establishing an important “venue” for talks, said Syed Mohammad Ali, a lecturer at Johns Hopkins University and analyst of Pakistani politics.

“I think the most important thing here is to have created a channel of mediation,” Ali said. “And in conflict situations that is of vital importance.”

Ali, who is familiar with the early negotiations, said early diplomatic exchanges have been “maximalist” as the two sides remain far apart.

He cautioned that Pakistan, which has offered to host direct talks, would by itself “not be in a position to really help hammer this out … they can continue playing this role, but the terms are going to be set elsewhere.”

The introduction of China to diplomatic discussions, he said, could bring the kind of “big power pressure” and “strategic leverage” that the US and Iran, whose economies are intertwined with Beijing’s, might respond to.

The Chinese and Pakistani governments released a five-point plan, which called for an immediate ceasefire and “normal passage” through the Strait of Hormuz, after a meeting of their foreign ministers in Beijing on Tuesday. Trump is set to visit China in May.

Esfandyar Batmanghelidj, an expert on Iranian politics and economics and an adjunct professor at Johns Hopkins, said any durable diplomatic breakthrough would likely follow a set of “high-level principles” that enables a ceasefire.

Leaders of the Iranian regime won’t readily come to the negotiating table, Batmanghelidj said, unless the conflict is perceived as a “stalemate” with the U.S. and talks are not framed as capitulation to Trump. Hardliners in Tehran, including leadership of the Iranian Revolutionary Guard Corps which would be allergic to negotiating with Washington, are still believed to wield considerable influence.

But “the elements” for a deal “are there,” Batmanghelidj said.

“Ultimately, this war has gone well enough for the Iranians that they can also point to a victory, but it has also been painful enough that even those that are very hardline in the Iranian system will understand that they don’t want to run a country that has been turned into some sort of basket case.”

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(NEW YORK) — One year after Elon Musk began an unprecedented attempt to eliminate swaths of the federal government, newly released deposition videos are providing a never-before-seen look at two of the people responsible for the largest mass termination of federal grants in the National Endowment for the Humanities’ history.

According to the depositions and other materials released as part of a civil lawsuit related to the funding cuts, the Department of Government Efficiency (DOGE) relied on ChatGPT to identify more than $100 million in grants related to diversity, equity, and inclusion (DEI) that were later cancelled.

When President Donald Trump returned to office last January, he empowered Musk to slash federal spending as a lead adviser in the newly created DOGE. Within days, all agencies were directed to put DEI staff on leave and related programs were shuttered.

In lengthy depositions, two DOGE employees — Justin Fox and Nate Cavanaugh — defended the effort to cut “useless agencies” as part of DOGE’s attempt to reduce the federal deficit.

“You don’t regret that people might have lost important income … to support their lives?” an attorney asked Cavanaugh about the grant cancellations.

“No. I think it was more important to reduce the federal deficit from $2 trillion to close to zero,” Cavanaugh said.

“Did you reduce the federal deficit?” the attorney asked.

“No, we didn’t,” Cavanaugh said.

With backgrounds in tech and finance, neither man worked in government prior to joining DOGE last year. Cavanaugh said they originally determined which grants could be cut based on if they included certain words — like “DEI, DEIA, Equity, Inclusion, BIPAC, LGBTQ” — though the final decision about cuts was up to the head of individual agencies.

“Do you think it’s inappropriate in any way that someone in their 20s with no experience with grants for the federal government was making personal judgment calls about what grants to cancel?” an attorney asked.

“Um, no. I don’t think it’s inappropriate,” Cavanaugh said, arguing that he did not need formal education or experience to make informed judgments.

“So presumably you read some of these books that would have informed you on how to cancel a grant based on DEI,” the attorney asked.

“Um, I did not read a book, um, on how to discern whether a grant includes DEI or not. I read the actual description of the actual grant,” Cavanaugh said.

Fox said they instead turned to OpenAI’s ChatGPT to help sift through the thousands of grants awarded by the National Endowment for the Humanities.

According to court filings, the men prompted ChatGPT by asking, “From the perspective of someone looking to identify DEI grants, does this involve DEI? Respond factually in less than 120 characters.· Begin with ‘Yes.’ o. ‘No.’ followed by a brief explanation.· Do not use ‘this initiative’ or ‘this description’ in your response.”

Fox was repeatedly pressed by attorneys to explain certain funding decisions, such as defunding a language center — described as a “wasteful, noncritical spend” — or projects related to Black history and civil rights.

“Why is a documentary about Holocaust survivors DEI?” an attorney asked.

“It’s a gender-based story that’s inherently discriminatory to focus on this specific group,” Fox said.

According to the depositions and legal documents, the men did not provide a clear definition for DEI or take additional steps to ensure the decisions were not discriminatory — arguing it was not necessary because AI software was not the final decision-maker.

“Did you do anything to ensure that ChatGPT’s perception of DEI as applied here wouldn’t discriminate on the basis of sex?” an attorney asked, prompting another objection.

“It didn’t matter,” Fox said.

DOGE’s efforts in multiple federal agencies and departments last year faced opposition and lawsuits, with critics raising concerns about the group’s effectiveness and its access to sensitive data. 

Both Fox and Cavanaugh defended the funding decisions, arguing the cuts were necessary to reduce the deficit, though they never achieved their goals.

“Did you ever find it problematic that you were, alongside Nate, short-listing for termination projects that had hits on words like Black, homosexual, LGBTQ+?” an attorney asked, prompting an objection and follow up question.

“We were identifying wasteful spend in the government based on administration direction. That was the whole reason we were there, was to find savings,” Fox said, though he acknowledged the deficit was never reduced.

Their work cutting grants from the National Endowment for the Humanities was memorialized in a social media post by DOGE, which vowed that any future grants would be “merit-based and awarded to non-DEI, pro-America causes.”

According to the depositions, some of the saved funds were spent on the National Garden of American Heroes — a sculpture garden to commemorate the country’s 250th anniversary.

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